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Introduction
Taxability of various components of salary:
A. Allowances
B. Perquisites

C. Deduction from salary

Deduction under Chapter VI-A

D. Retirement Benefits
E. Arrear of Salary and relief under section 89(1)

F. Other Benefits

I. Income under the head Salaries

Back to Top

Salary is defined to include:

a) Wages
b) Annuity
c) Pension
d) Gratuity
e) Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
f) Advance of Salary
g) Leave Encashment
h) Annual accretion to the balance of Recognized Provident Fund
i) Transferred balance in Recognized Provident Fund
j) Contribution by Central Government or any other employer to Employees Pension Account as
referred in Sec. 80CCD
Points to consider:
a) Salary income is chargeable to tax on due basis or receipt basis whichever is earlier.
b) Existence of relationship of employer and employee is must between the payer and payee to tax
the income under this head.
c) Income from salary taxable during the year shall consists of following:
i. Salary due from employer (including former employer) to taxpayer during the previous year,

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whether paid or not;

ii. Salary paid by employer (including former employer) to taxpayer during the previous year
before it became due;
iii. Arrear of salary paid by the employer (including former employer) to taxpayer during the
previous year, if not charged to tax in any earlier year;
Exceptions - Remuneration, bonus or commission received by a partner from the firm is not taxable
under the head Salaries rather it would be taxable under the head business or profession.
Place of accrual of salary:
a) Salary accrues where the services are rendered even if it is paid outside India;
b) Salary paid by the Foreign Government to his employee serving in India is taxable under the head
Salaries;
c) Leave salary paid abroad in respect of leave earned in India shall be deemed to accrue or arise in
India.
Exceptions - If a Citizen of India render services outside India, and receives salary from Government
of India, it would be taxable as salary deemed to have accrued in India.

Taxability of various components of salary: Back to Top

No. Section Particulars Taxability/Exemption

1. 17 Basic salary Fully taxable
2. 17 Dearness Allowance (referred to as DA) Fully taxable
3. 17 Bonus, fees or commission Fully taxable

A. Allowances Back to Top

4. 10(13A) House rent allowance Least of the following is exempt:

read with a) Actual HRA Received
Rule 2A b) 40% of Salary (50%, if house
situated in Mumbai, Calcutta,
Delhi or Chennai)
c) Rent paid minus 10% of salary
* Salary = Basic + DA (if part of
retirement benefit) + Turnover based
Commission
Note:
i. Fully taxable, if HRA is
received by an employee
who is living in his own
house or if he does not
pay any rent
ii. It is mandatory for
employee to report PAN
of the landlord to the
employer if rent paid is
more than Rs. 1,00,000
[Circular No. 08 /2013

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dated 10-10-2013].
5. 10(14) Children education allowance Up to Rs. 100 per month per child up
to a maximum of 2 children is exempt
6. 10(14) Hostel expenditure allowance Up to Rs. 300 per month per child up
to a maximum of 2 children is exempt
7. 10(14) Transport allowance granted to an Up to Rs. 1600 per month (Rs. 3200
employee to meet expenditure on per month for blind and handicapped
commuting between place of residence employees) is exempt
and place of duty
8. Sec. Allowance granted to an employee Amount of exemption shall be lower
10(14) working in any transport business to of following:
meet his personal expenditure during his a) 70% of such allowance; or
duty performed in the course of running b) Rs. 10,000 per month.
of such transport from one place to
another place provided employee is not
in receipt of daily allowance.
9. 10(14) Conveyance allowance granted to meet Exempt to the extent of expenditure
the expenditure on conveyance in incurred for official purposes
performance of duties of an office
10. 10(14) Travelling allowance to meet the cost of Exempt to the extent of expenditure
travel on tour or on transfer incurred for official purposes
11. 10(14) Daily allowance to meet the ordinary Exempt to the extent of expenditure
daily charges incurred by an employee incurred for official purposes
on account of absence from his normal
place of duty
12. 10(14) Helper/Assistant allowance Exempt to the extent of expenditure
incurred for official purposes
13. 10(14) Research allowance granted for Exempt to the extent of expenditure
encouraging the academic research and incurred for official purposes
other professional pursuits
14. 10(14) Uniform allowance Exempt to the extent of expenditure
incurred for official purposes
15. 10(7) Any allowance or perquisite paid or Fully Exempt
allowed by Government to its employees
(an Indian citizen) posted outside India
16. - Allowances to Judges of High Fully Exempt.
Court/Supreme Court (Subject to certain
conditions)
17. 10(45) Following allowances and perquisites Fully Exempt
given to serving Chairman/Member of
UPSC is exempt from tax:
a) Value of rent free official residence
b) Value of conveyance facilities
including transport allowance

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c) Sumptuary allowance
d) Leave travel concession
18. - Allowances paid by the UNO to its Fully Exempt
employees
19. 10(45) Allowances to Retired Exempt subject to maximum of Rs.
Chairman/Members of UPSC (Subject to 14,000 per month for defraying the
certain conditions) services of an orderly and for meeting
expenses incurred towards secretarial
assistant on contract basis.
20. Sec. Special compensatory Allowance (Hilly Amount exempt from tax varies from
10(14) Areas) (Subject to certain conditions and Rs. 300 to Rs. 7,000 per month.
read with locations)
Rule 2BB
21. Sec. Border area, Remote Locality or Amount exempt from tax varies from
10(14) Disturbed Area or Difficult Area Rs. 200 to Rs. 1,300 per month.
read with Allowance (Subject to certain conditions
Rule 2BB and locations)
22. Sec. Tribal area allowance in (a) Madhya Up to Rs. 200 per month is exempt
10(14) Pradesh (b) Tamil Nadu (c) Uttar
read with Pradesh (d) Karnataka (e) Tripura (f)
Rule 2BB Assam (g) West Bengal (h) Bihar (i)
Orissa
23. Sec. Compensatory Field Area Allowance. If Up to Rs. 2,600 per month is exempt
10(14) this exemption is taken, employee
read with cannot claim any exemption in respect
Rule 2BB of border area allowance (Subject to
certain conditions and locations)
24. Sec. Compensatory Modified Area Up to Rs. 1,000 per month is exempt
10(14) Allowance. If this exemption is taken,
read with employee cannot claim any exemption in
Rule 2BB respect of border area allowance
(Subject to certain conditions and
locations)
25. Sec. Counter Insurgency Allowance granted Up to Rs. 3,900 per month is exempt
10(14) to members of Armed Forces operating
read with in areas away from their permanent
Rule 2BB locations. If this exemption is taken,
employee cannot claim any exemption in
respect of border area allowance
(Subject to certain conditions and
locations)
26. Sec. Underground Allowance to employees Up to Rs. 800 per month is exempt
10(14) working in uncongenial, unnatural
read with climate in underground mines
Rule 2BB

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27. Sec. High Altitude Allowance granted to a) Up to Rs. 1,060 per month (for
10(14) armed forces operating in high altitude altitude of 9,000 to 15,000 feet)
read with areas (Subject to certain conditions and is exempt
Rule 2BB locations) b) Up to Rs. 1,600 per month (for
altitude above 15,000 feet) is
exempt
28. Sec. Highly active field area allowance Up to Rs. 4,200 per month is exempt
10(14) granted to members of armed forces
read with (Subject to certain conditions and
Rule 2BB locations)
29. Sec. Island Duty Allowance granted to Up to Rs. 3,250 per month is exempt
10(14) members of armed forces in Andaman
read with and Nicobar and Lakshadweep group of
Rule 2BB Island (Subject to certain conditions and
locations)
30. 10(14) City Compensatory Allowance Fully Taxable
31. 10(14) Fixed Medical Allowance Fully Taxable
32. 10(14) Tiffin, Lunch, Dinner or Refreshment Fully Taxable
Allowance
33. 10(14) Servant Allowance Fully Taxable
34. 10(14) Project Allowance Fully Taxable
35. 10(14) Overtime Allowance Fully Taxable
36. 10(14) Telephone Allowance Fully Taxable
37. 10(14) Holiday Allowance Fully Taxable
38. 10(14) Any Other Cash Allowance Fully Taxable

B. Perquisites Back to Top

39. 17(2)(i) Rent free unfurnished License fees determined in accordance with
read with accommodation provided to rules framed by Government for allotment of
Central and State houses shall be deemed to be the taxable value
Rule 3(1)
Government employees of perquisites.
40. 17(2)(i)/(ii) Unfurnished rent free Taxable value of perquisites
read with accommodation provided to i. If house property is owned by the
Rule 3(1) other employees employer, the taxable value of perquisite
shall be:
A. 15% of salary, if population of city
where accommodation is provided
exceeds 25 lakhs
B. 10% of salary, if population of city
where accommodation is provided
exceeds 10 lakhs but does not
exceed 25 lakhs
C. 7.5% of salary, if accommodation is

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provided in any other city

ii. If house property is taken on lease or rent
by the employer, the taxable value of
perquisite shall be:
i. Lease rent paid or payable by the
employer or 15% of the salary, whichever
is lower
*Salary includes:
a) Basic Pay
b) Dearness Allowance (only to the extent it
forms part of retirement benefit salary)
c) Bonus
d) Commission
e) All other allowances (only taxable portion)
f) Any monetary payment which is
chargeable to tax
But does not include
i. Value of any perquisite
ii. Employers contribution to PF
iii. Benefits received at the time of
retirement like gratuity, pension
etc.
Note:
1) Rent free accommodation is not
chargeable to tax if provided in remote
area.
2) Rent free accommodation provided to
High Court or Supreme Court Judges,
Union Ministers, Leader of Opposition in
Parliament, an official in Parliament and
Serving Chairman and members of UPSC
is tax free perquisite.
3) The value so determined shall be reduced
by the amount of rent, if any, recovered
from the employee.
4) If employee is transferred and retain
property at both the places, the taxable
value of perquisites for initial period of
90 days shall be determined with
reference to only one accommodation (at
the option of the assessee). The other one
will be tax free. However after 90 days,
taxable value of perquisites shall be
charged with reference to both the
accommodations.
41. 17(2)(i) Rent free furnished Taxable value of perquisites shall be computed
read with accommodation in following manner:
Rule 3(1) a) Taxable value of perquisite assuming
accommodation to be provided to the

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employee is unfurnished
b) Add: 10% of original cost of furniture and
fixtures (if these are owned by the
employer) or actual higher charges paid
or payable (if these are taken on rent by
the employer).
c) Less: The value so determined shall be
reduced by the amount of rent, if any,
recovered from the employee
42. 17(2)(i) Accommodation provided in Taxable value of perquisite shall be lower of
read with a hotel following:
Rule 3(1) Hotel accommodation will a) Actual charges paid or payable by the
not be chargeable to tax if : employer to such hotel; or
a) It is provided for a total b) 24% of salary
period not exceeding in
aggregate 15 days in
the financial year; and
b) Such accommodation in
hotel is provided on
employees transfer
from one place to
another place.
43. 17(2)(iii) Motor Car / Other Taxable value of perquisites (See Note 1
read with Conveyance below)
Rule 3(2)
44. 17(2)(iii) Services of a domestic Taxable value of perquisite shall be salary paid
read with servant including sweeper, or payable by the employer for such services
Rule 3(3) gardener, watchmen or less any amount recovered from the employee.
personal attendant (taxable
only in case of specified
employee [See Note 4])
45. 17(2)(iii) Supply of gas, electricity or Taxable value of perquisites:
read with water for household purposes Manufacturing cost per unit incurred by the
Rule 3(4) employer., if provided from resources owned
by the employer;
Amount paid by the employer, if purchased
by the employer from outside agency
Note:
1. Any amount recovered from the
employee shall be deducted from
the taxable value of perquisite.
2. Taxable in case of specified
employees only [See note 4]
46. 17(2)(iii) Education Facilities Taxable value of perquisites (See Note 2
read with below)
Rule 3(5)

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47. 17(2)(iii) Transport facilities provided Value at which services are offered by the
read with by the employer engaged in employer to the public less amount recovered
Rule 3(6) carriage of passenger or from the employee shall be a taxable perquisite
goods (except Airlines or
Railways)
48. 17(2)(v) Amount payable by the Fully Taxable
employer to effect an
insurance on life of employee
or to effect a contract for an
annuity
49. 17(2)(vi) ESOP/ Sweat Equity Shares Fair Market value of shares or securities on the
read with date of exercise of option by the assessee less
Rule 3(8) amount recovered from the employee in
respect of such shares shall be the taxable
value of perquisites.
Fair Market Value shall be determined as
follows:
a) In case of listed Shares: Average of
opening and closing price as on date of
exercise of option (Subject to certain
conditions and circumstances)
b) In case of unlisted shares/ security other
than equity shares: Value determined by a
Merchant Banker as on date of exercise
of option or an earlier date, not being a
date which is more than 180 days earlier
than the date of exercise of the option.
50. 17(2)(vii) Employers contribution Taxable in the hands of employee to the extent
towards superannuation fund such contribution exceeds Rs.1,50,000
51. 17(2)(viii) Interest free loan or Loan at Interest free loan or loan at concessional rate of
read with concessional rate of interest interest given by an employer to the employee
Rule 3(7)(i) (or any member of his household) is a
perquisite chargeable to tax in the hands of all
employees on following basis:
1) Find out the maximum outstanding
monthly balance (i.e. the aggregate
outstanding balance for each loan as on
the last day of each month);
2) Find out rate of interest charged by the
SBI as on the first day of relevant
previous year in respect of loan for the
same purpose advanced by it;
3) Calculate interest for each month of the
previous year on the outstanding amount
(mentioned in Step 1) at the rate of
interest given in Step 2
4) From the total interest calculated for the
entire previous year (step 3), deduct
interest actually recovered, if any, from
employee

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5) The balance amount (Step 3-Step 4) is

taxable value of perquisite
Nothing is taxable if:
a) Loan in aggregate does not exceed Rs.
20,000; or
b) Loan is provided for treatment of specified
diseases (Rule 3A) like neurological
diseases, Cancer, AIDS, Chronic renal
failure, Hemophilia (specified diseases).
However, exemption is not applicable to
so much of the loan as has been
reimbursed to the employee under any
medical insurance scheme.
52. 17(2)(viii) Facility of travelling, touring a) Taxable value of perquisite shall be
read with and accommodation availed expenditure incurred by the employer
Rule 3(7)(ii) of by the employee or any less amount recovered from employee.
member of his household for b) Where such facility is maintained by the
any holiday employer, and is not available uniformly
to all employees, the value of benefit
shall be taken to be the value at which
such facilities are offered by other
agencies to the public.
53. 17(2)(viii) Free food and beverages 1) Fully Taxable: Free meals in excess of Rs.
read with provided to the employee 50 per meal less amount paid by the
Rule employee shall be a taxable perquisite
3(7)(iii) 2) Exempt from tax: Following free meals
shall be exempt from tax:
a) Food and non-alcoholic beverages
provided during working hours in
remote area or in an offshore
installation;
b) Tea, Coffee or Non-Alcoholic
beverages and Snacks during
working hours are tax free
perquisites;
c) Food in office premises or through
non-transferable paid vouchers
usable only at eating joints
provided by an employer is not
taxable, if cost to the employer is
Rs. 50(or less) per meal.
54. 17(2)(viii) Gift or Voucher or Coupon on a) Gifts in cash or convertible into money
read with ceremonial occasions or (like gift cheque) are fully taxable
Rule otherwise provided to the b) Gift in kind up to Rs.5,000 in aggregate per
3(7)(iv) employee annum would be exempt, beyond which
it would be taxable.
55. 17(2)(viii) Credit Card a) Expenditure incurred by the employer in
read with respect of credit card used by the
Rule 3(7)(v) employee or any member of his

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household less amount recovered from

the employee is a taxable perquisite
b) Expenses incurred for official purposes
shall not be a taxable perquisite provided
complete details in respect of such
expenditure are maintained by the
employer
56. 17(2)(viii) Free Recreation/ Club a) Expenditure incurred by the employer
read with Facilities towards annual or periodical fee etc.
Rule (excluding initial fee to acquire corporate
3(7)(vi) membership) less amount recovered from
the employee is a taxable perquisite
b) Expenses incurred on club facilities for
the official purposes are exempt from
tax.
c) Use of health club, sports and similar
facilities provided uniformly to all
employees shall be exempt from tax.
57. 17(2)(viii) Use of movable assets of the Taxable value of perquisites
read with employer by the employee is a) Use of Laptops and Computers: Nil
Rule a taxable perquisite b) Movable asset other than Laptops,
3(7)(vii) computers and Motor Car*: 10% of
original cost of the asset (if asset is
owned by the employer) or actual higher
charges incurred by the employer (if
asset is taken on rent) less amount
recovered from employee.
*See Note 1 for computation of perquisite
value in case of use of the Motor Car
58. 17(2)(viii) Transfer of movable assets by Taxable value of perquisites
read with an employer to its employee a) Computers, Laptop and Electronics items:
Rule Actual cost of asset less depreciation at
3(7)(viii) 50% (using reducing balance method) for
each completed year of usage by
employer less amount recovered from the
employee
b) Motor Car: Actual cost of asset less
depreciation at 20% (using reducing
balance method) for each completed year
of usage by employer less amount
recovered from the employee
c) Other movable assets: Actual cost of asset
less depreciation at 10% (on SLM basis)
for each completed year of usage by
employer less amount recovered from the
employee.
59. 17(2)(viii) Any other benefit or amenity Taxable value of perquisite shall be computed
read with extended by employer to on the basis of cost to the employer (under an
Rule employee arms length transaction) less amount

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3(7)(ix) recovered from the employee.

However, expenses on telephones including a
mobile phone incurred by the employer on
behalf of employee shall not be treated as
taxable perquisite.
60. 10(10CC) Tax paid by the employer on Fully exempt
perquisites (not provided for
by way of monetary
payments) given to employee
61. 10(5) Leave Travel Concession or The exemption shall be limited to fare for going
Assistance (LTC/LTA), anywhere in India along with family twice in a
extended by an employer to block of four years:
an employee for going Where journey is performed by Air -
anywhere in India along with Exemption up to Air fare of economy
his family* class in the National Carrier by the
*Family includes spouse, shortest route
children and dependent Where journey is performed by Rail -
brother/sister/parents. Exemption up to air-conditioned first
However, family doesnt class rail fare by the shortest route
include more than 2 children If places of origin of journey and destination
of an Individual born on or are connected by rail but the journey is
after 01-10-1998. performed by any other mode of
(Subject to certain transport - Exemption up to
conditions) air-conditioned first class rail fare by the
shortest route.
Where the places of origin of journey and
destination are not connected by rail:
* Where a recognized public transport
system exists - Exemption up to
first Class or deluxe class fare by
the shortest route
* Where no recognized public
transport system exists -
Exemption up to air conditioned
first class rail fare by shortest
route.
Notes:
i. Two journeys in a block of 4
calendar years is exempt
ii. Taxable only in case of Specified
Employees [See note 4]
62. Proviso to Medical facilities in India a) Expense incurred or reimbursed by the
section employer for the medical treatment of the
17(2) employee or his family (spouse and
children, dependent - parents, brothers
and sisters) in any of the following
hospital is not chargeable to tax in the
hands of the employee:
i. Hospital maintained by the
employer.

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ii. Hospital maintained by the

Government or Local Authority or
any other hospital approved by
Central Government
iii. Hospital approved by the Chief
Commissioner having regard to the
prescribed guidelines for treatment
of the prescribed diseases.
b) Medical insurance premium paid or
reimbursed by the employer is not
chargeable to tax.
c) Any other expenditure incurred or
reimbursed by the employer for providing
medical facility in India is not chargeable
to tax up to Rs. 15,000 in aggregate per
assessment year.
63. Proviso to Medical facilities outside Any expenditure incurred or reimbursed by the
section India employer for medical treatment of the
17(2) employee or his family member outside India is
exempt to the extent of following (subject to
certain condition):
a. Expenses on medical treatment -
exempt to the extent permitted by
RBI.
b. Expenses on stay abroad for
patient and one attendant -
exempt to the extent permitted by
RBI.
c. Expenditure incurred on travelling
of patient and one attendant-
exempt, if Gross Total Income
(before including the travel
expenditure) of the employee,
does not exceed Rs. 2,00,000.

C. Deduction from salary Back to Top

1. 16 (ii) Entertainment Allowance Least of the following is exempt from tax:

received by the Government a) Rs 5,000
employees (Fully taxable in b) 1/5th of salary (excluding any allowance,
case of other employees)
benefits or other perquisite)
c) Actual entertainment allowance received
2. 16(iii) Employment Tax/Professional Amount actually paid during the year. However, if
Tax. professional tax is paid by the employer on behalf of
its employee than it is first included in the salary of
the employee as a perquisite and then same amount
is allowed as deduction.

Deduction under Chapter VI-A

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D. Retirement Benefits Back to Top

Leave Encashment
1. 10(10AA) Encashment of unutilized earned Fully Exempt
leave at the time of retirement of
Government employees
2. 10(10AA) Encashment of unutilized earned Least of the following shall be exempt from
leave at the time of retirement of tax:
other employees (not being a a) Amount actually received
Government employee)
b) Unutilized earned leave* X Average
monthly salary
c) 10 months Average Salary**
d) Rs. 3,00,000
* While computing unutilized earned leave,
earned leave entitlements cannot exceed 30
days for each completed year of service
rendered to the current employer
** Average salary = Average Salary*** of
last 10 months immediately preceding the
retirement
***Salary = Basic Pay + DA (to the extent it
forms part of retirement benefits)+ turnover
based commission
Retrenchment Compensation
3. 10(10B) Retrenchment Compensation Least of the following shall be exempt from
received by a workman under tax:
the Industrial Dispute Act, 1947 a) Amount calculated as per section
(Subject to certain conditions). 25F(b)of the Industrial Disputes Act,
1947;
b) Rs. 5,00,000; or
c) Amount actually received
Note:
i. Relief under Section 89(1) is available
ii. 15 days average pay for each completed
year of continuous service or any part
thereof in excess of 6 months is to be
adopted under section 25F(b) of the
Industrial Disputes Act,1947
Gratuity
4. 10(10)(i) Gratuity received by Fully Exempt
Government Employees (Other
than employees of statutory
corporations)
5. 10(10)(ii) Death -cum-Retirement Gratuity Least of following amount is exempt from
received by other employees tax:

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who are covered under Gratuity 1. (*15/26) X Last drawn salary** X

Act, 1972 (other than completed year of service or part
Government employee) (Subject thereof in excess of 6 months.
to certain conditions). 2. Rs. 10,00,000
3. Gratuity actually received.
*7 days in case of employee of seasonal
establishment.
** Salary = Last drawn salary including DA
but excluding any bonus, commission, HRA,
overtime and any other allowance, benefits
or perquisite
6. 10(10)(iii) Death -cum-Retirement Gratuity Least of following amount is exempt from
received by other employees tax:
who are not covered under 1. Half months Average Salary* X
Gratuity Act, 1972 (other than Completed years of service
Government employee) (Subject 2. Rs. 10,00,000
to certain conditions).
3. Gratuity actually received.
*Average salary = Average Salary of last 10
months immediately preceding the month of
retirement
** Salary = Basic Pay + DA (to the extent it
forms part of retirement benefits)+ turnover
based commission
Pension
7. - Pension received from United Fully Exempt
Nation Organization by the
employee of his family members
8. 10(10A)(i) Commuted Pension received by Fully Exempt
an employee of Central
Government, State Government,
Local Authority Employees and
Statutory Corporation
9. 10(10A)(ii) Commuted Pension received by 1/3 of full value of commuted pension will
other employees who also be exempt from tax
receive gratuity
10. 10(10A)(iii) Commuted Pension received by 1/2 of full value of commuted pension will
other employees who do not be exempt from tax
receive any gratuity
11. 10(19) Family Pension received by the Fully Exempt
family members of Armed
Forces
12. 57(iia) Family pension received by 33.33% of Family Pension subject to
family members in any other maximum of Rs. 15,000 shall be exempt
case from tax
Voluntary Retirement

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13. 10(10C) Amount received on Voluntary Least of the following is exempt from tax:
Retirement or Voluntary 1) Actual amount received as per the
Separation (Subject to certain guidelines i.e. least of the following
conditions)
a) 3 months salary for each completed year
of services
b) Salary at the time of retirement X No. of
months of services left for retirement;
or
2) Rs. 5,00,000
Provident Fund
14. - Employees Provident Fund For taxability of contribution made to
various employees provident fund and
interest arising thereon see Note 3.

National Pension System (NPS)

Any payment from the National Pension
System Trust to an employee on closure of
his account or on his opting out of the
pension scheme referred to in section
15. 10(12A) National Pension System
80CCD, to the extent it does not exceed
40% of the total amount payable to him at
the time of such closure or his opting out of
the scheme.

E. Arrear of Salary and relief under section 89(1) Back to Top

1. 15 Arrear of salary Taxable in the year of receipt. However relief under section 89 is
and advance available
salary
2. 89 Relief under If an individual receives any portion of his salary in arrears or in
Section 89 advance or receives profits in lieu of salary, he can claim relief as per
provisions of section 89 read with rule 21A

F. Other Benefits Back to Top

1. - Lump-sum payment made gratuitously or by way of Fully exempt in the

compensation or otherwise to widow or other legal hands of widow or other
heirs of an employee who dies while still in active legal heirs of employee
service [Circular No. 573, dated 21-08-1990]
2. - Ex-gratia payment to a person (or legal heirs) by Fully exempt in the
Central or State Government, Local Authority or hands of individual or
Public Sector Undertaking consequent upon injury to legal heirs
the person or death of family member while on duty
[Circular No. 776, dated 08-06-1999]
3. - Salary received from United Nation Organization Fully exempt
[Circular No. 293, dated 10-02-1981]

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4. 10(6)(ii) Salary received by foreign national as an officials of Fully exempt if

an embassy, high commission, legation, consulate or corresponding official in
trade representation of a foreign state that foreign country
enjoys a similar
exemption
5. 10(6)(vi) Remuneration received by non-resident foreign Fully exempt
citizen as an employee of a foreign enterprise for
services rendered in India, if:
a) Foreign enterprise is not engaged in any trade or
business in India
b) His stay in India does not exceed in aggregate a
period of 90 days in such previous year
c) Such remuneration is not liable to deducted
from the income of employer chargeable under
this Act
6. 10(6)(viii) Salary received by a non-resident foreign national for Fully exempt
services rendered in connection with his employment
on a foreign ship if his total stay in India does not
exceed 90 days in the previous year.
7. - Salary and allowances received by a teacher Fully exempt
/professor from SAARC member state (Subject to
certain conditions).

Notes:
1. Motor Car (taxable only in case of specified employees [See note 4] except when car owned by the
employee is used by him or members of his household wholly for personal purposes and for which
reimbursement is made by the employer)

S. Circumstances Engine Capacity up to Engine Capacity above

No. 1600 cc 1600 cc
1 Motor Car is owned or hired by the employer
1.1 Where maintenances and running expenses including remuneration of the chauffeur are met
or reimbursed by the employer.
1.1-A Used wholly and exclusively in Fully exempt subject to Fully exempt subject to
the performance of official maintenance of specified maintenance of specified
duties. documents documents
1.1-B Used exclusively for the Actual amount of expenditure incurred by the employer on
personal purposes of the the running and maintenance of motor car including
employee or any member of his remuneration paid by the employer to the chauffeur and
household. increased by the amount representing normal wear and tear
of the motor car at 10% per annum of the cost of vehicle
less any amount charged from the employee for such use is
taxable value of perquisite.
1.1-C The motor car is used partly in Rs. 1,800 per month (plus Rs. 2,400 per month (plus
the performance of duties and Rs. 900 per month, if Rs. 900 per month, if
partly for personal purposes of chauffeur is also provided to chauffeur is also provided to
the employee or any member of run the motor car) shall be run the motor car) shall be

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his household. taxable value of perquisite taxable value of perquisite

Nothing is deductible in respect of any amount recovered
from the employee.
1.2 Where maintenances and running expenses are met by the employee.
1.2-A Used wholly and exclusively in Not a perquisite, hence, not Not a perquisite, hence, not
the performance of official taxable taxable
duties.
1.2-B Used exclusively for the Expenditure incurred by the employer (i.e. hire charges, if
personal purposes of the car is on rent or normal wear and tear at 10% of actual cost
employee or any member of his of the car, if car is owned by the employer) plus salary of
household chauffeur if paid or payable by the employer minus amount
recovered from the employee.
1.2-C The motor car is used partly in Rs. 600 per month (plus Rs. Rs. 900 per month (plus Rs.
the performance of duties and 900 per month, if chauffeur 900 per month, if chauffeur
partly for personal purposes of is also provided to run the is also provided to run the
the employee or any member of motor car) shall be taxable motor car) shall be taxable
his household value of perquisite value of perquisite
Nothing is deductible in respect of any amount recovered
from the employee.
2 Motor Car is owned by the employee
2.1 Where maintenances and running expenses including remuneration of the chauffeur are met
or reimbursed by the employer.
2.1-A The reimbursement is for the use Fully exempt subject to Fully exempt subject to
of the vehicle wholly and maintenance of specified maintenance of specified
exclusively for official purposes documents documents
2.1-B The reimbursement is for the use Actual expenditure incurred by the employer minus amount
of the vehicle exclusively for the recovered from the employee
personal purposes of the
employee or any member of his
household (taxable in case of
specified employee as well as
non-specified employee)
2.1-C The reimbursement is for the use Actual expenditure incurred Actual expenditure incurred
of the vehicle partly for official by the employer minus Rs. by the employer minus Rs.
purposes and partly for personal 1800 per month and Rs. 900 2400 per month and Rs. 900
purposes of the employee or any per month if chauffer is also per month if chauffer is also
member of his household. provided minus amount provided minus amount
recovered from employee recovered from employee
shall be taxable value of shall be taxable value of
perquisite. perquisite.
3 Where the employee owns any other automotive conveyance and actual running and
maintenance charges are met or reimbursed by the employer
3.1 Reimbursement for the use of Fully exempt subject to Fully exempt subject to
the vehicle wholly and maintenance of specified maintenance of specified
exclusively for official purposes; documents documents

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3.2 Reimbursement for the use of Actual expenditure incurred Not Applicable
vehicle partly for official by the employer as reduced
purposes and partly for personal by Rs. 900 per month
purposes of the employee.

Educational Facilities
Taxable only in the hands of specified employees [See note 4]
Facility Value of perquisite
extended to
Provided in the school owned by the Provided in any other school
employer
Children Cost of such education in similar school less Rs. Amount incurred less amount
1,000 per month per child (irrespective of recovered from employee (an
numbers of children) less amount recovered exemption of Rs. 1,000 per month
from employee per child is allowed)
Other Cost of such education in similar school less Cost of such education incurred
family amount recovered from employee
member

Other Educational Facilities

Particulars Taxable Value of
Perquisites
Reimbursement of school fees of children or family member of Fully taxable
employees
Free educational facilities/ training of employees Fully exempt

Employees Provident Fund

Tax treatment in respect of contributions made to and payment from various provident funds are
summarized in the table given below:

Particulars Statutory Recognized provident Unrecognized Public

provident fund provident fund provident
fund fund
Employers Fully Exempt only to the Fully Exempt -
contribution to Exempt extent of 12% of salary*
provident fund
Deduction under Available Available Not Available Available
section 80C on
employees contribution
Interest credited to Fully Exempt only to the Fully Exempt Fully
provident fund Exempt extent rate of interest Exempt
does not exceed 9.5%
Payment received at Fully Fully Exempt (Subject Fully Taxable Fully
the time of retirement Exempt to certain conditions and (except employees Exempt
or termination of circumstances) contribution)
service

* Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits) +

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turnover based commission

Payment from recognized provident fund shall be exempt in the hands of employees in following
circumstances:
a) If employee has rendered continue service with his employer (including previous employer, when
PF account is transferred to current employer) for a period of 5 years or more
b) If employee has been terminated because of certain reasons which are beyond his control (ill
health, discontinuation of business of employer, etc.)
4. Specified Employee
The following employees are deemed as specified employees:
1) A director-employee
2) An employee who has substantial interest (i.e. beneficial owner of equity shares carrying 20% or
more voting power) in the employer-company
3) An employee whose monetary income* under the salary exceeds Rs.50,000
*Monetary Income means Income chargeable under the salary but excluding perquisite value of all
non-monetary perquisites

[As amended by Finance Act, 2016]

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